GLOSSARY · TAX & ESTATE
FICA tax
The Social Security and Medicare taxes on wages, named after the Federal Insurance Contributions Act. Employees pay 6.2% for Social Security up to a yearly wage cap and 1.45% for Medicare on all wages, and the employer pays a matching amount. Self-employed people pay both halves as self-employment tax, of which half is deductible.
Also called: payroll tax, Social Security and Medicare tax
FORMULA
Employee FICA = 6.2% × wages up to the cap + 1.45% × all wages (+ 0.9% above the Additional Medicare threshold)
COMPUTE IT WITH YOUR NUMBERS
LEARN IT PROPERLY
CHAPTER · ARRIVING AND WORKING ON A VISA · FOUNDATIONSSocial Security and Medicare: Who Pays and When It StartsCHAPTER · INCOME FUNDAMENTALS · FOUNDATIONSThe Three Kinds of IncomeRELATED TERMS
SOURCES
- Topic no. 751, Social Security and Medicare withholding rates. Internal Revenue Service.
- Topic no. 554, Self-employment tax. Internal Revenue Service.